CASE28_TNK-BP

CASE28_TNK-BP - TNK-BP (Russia) 2008 INTRODUCTION This case...

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TNK-BP (Russia) 2008 INTRODUCTION This case portrays the highly uncertain scenario facing BP in Russia at the end of 2007. In the midst of unraveling relations with its cooperative partner and undesirable host government practices, ideal strategic conditions are implausible. In order to maximize outcomes under such imperfect circumstances, BP's senior management needs to fully assess the situational risks, understand the dynamics and motivations driving stakeholder behavior, and establish a plan which can appeal to all interested parties. 1. As BP devises a strategy for managing business holdings in Russia, what risks does the company face? 2. What important motivational factors are underlying the behavior of prominent stakeholders? 3. What steps should BP take to protect its investments and ongoing global operations? ANALYSIS Environmental Threats Due to globalization, there is an increasing economic interdependence across national borders. The flow of goods, financial capital, and knowledge among countries is growing, and international performance standards are on the rise. Interesting and promising opportunities are associated with the emergence of the global economy, but they are not without related risks. BP is the world's third largest oil and gas concern, holding a diverse range of international pipeline, refining, chemical, and retail assets. In the oil and gas industry, competitiveness depends on continually increasing oil and gas production and replacing reserves. Reserves are limited globally, which restricts options available to industry participants. The size, importance, and potential of the oil industry in Russia is a big draw for companies like BP -- especially as the company tries to match the financial performance of mega-rivals, ExxonMobile and Shell. To access key supplies of raw material, BP has taken steps to secure important resources within Russia. But, despite the strengths of its Russian assets and operations, the company has not been able to meet the growth level it is seeking. Oil production is actually decreasing in Russia due to: - aging and poorly-maintained oil fields, - the confiscatory tax and regulatory regime, and - deficient investments (both Russian and foreign) in new exploration and development. In Russia, much of the risk faced by BP is concentrated in the political and legal segment of the general environment. Oversight of vital natural resources is intense, and government policy is volatile. Revenues are negatively impacted by heavy export duties TNK-BP - 1
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TNK-BP (Russia) 2008 and a complex domestic pricing structure. Sociocultural and institutional attributes have also interfered with BP's integration in the Russian oil and gas market. Government and partner tactics being used in Russia should be of grave concern
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This note was uploaded on 03/22/2011 for the course ACCT 3391 taught by Professor Turpin during the Spring '10 term at Troy.

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CASE28_TNK-BP - TNK-BP (Russia) 2008 INTRODUCTION This case...

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